Legal & General High Income Trust Annual Manager s Short Report for the year ended 5 September 2017 Distribution Number 49
Investment Objective and Policy The investment objective is to invest in a variety of fixed interest securities, including overseas issues, in order to achieve a high income. Securities selected will normally be of an investment rating commensurate with the objective. Risk Profile Credit Risk This Trust is invested in financial securities such as bonds. With these investments, there is a risk of suffering loss due to a party not meeting its financial obligations. This risk is managed by monitoring the financial stability of investments and companies, via credit ratings. Market Risk Market risk arises mainly from uncertainty about future prices. It represents the potential loss of the Trust through holding market positions in the face of market movements. The Manager adheres to the investment guidelines and in this way, monitors and controls the exposure to risk from any type of security, sector or issuer. Currency Risk This Trust holds investments in overseas financial securities. The performance of the Trust may therefore be affected by changes in exchange rates. This risk may be managed by the use of forward currency contracts, which aim to manage the effect of changing exchange rates. Interest Rate Risk This Trust is invested in interest bearing securities. The performance of the Trust may therefore be affected by changes in interest rates. The active monitoring and adjustment of the investments in the portfolio manages this risk. Trust Facts Period End Dates for Distributions: 5 Mar, Jun, Sep, Dec Distribution Dates: 5 Feb, May, Aug, Nov Ongoing Charges Figures: 5 Sep 17 5 Sep 16 R-Class 1.15% 1.15% A-Class 1.15% 1.15% F-Class 0.65% 0.65% I-Class 0.41% 0.41% G-Class 0.01% 1 0.01% X-Class 0.41% 0.41% 1 See Significant changes on page 21. The Ongoing Charges Figure (OCF) is the ratio of the Trust s total discloseable costs (excluding overdraft interest) to the average net assets of the Trust. The OCF is intended to provide a reliable figure which gives the most accurate measure of what it costs to invest in a trust and is calculated based on the last period s figures. 1
Risk and Reward Profile Lower risk Higher risk Potentially lower rewards Potentially higher rewards 1 2 3 4 5 6 7 This risk and reward profile is based on historical data which may not be a reliable indication of the Trust s risk and reward category in the future. The category is based on the rate at which the value of the Trust has moved up and down in the past. This Trust is in category three because it invests in sub-investment grade bonds which generally provide higher rewards and higher risks than other investments such as investment grade bonds or deposits. It also provides lower rewards and lower risks than investing in company shares. The Trust s category is not guaranteed to remain the same and may change over time. Even a trust in the lowest category is not a risk free investment. Distribution Information R-Class The distribution payable on 5 November 2017 is 0.6351p per unit for distribution units and 1.5715p per unit for accumulation units. A-Class The distribution payable on 5 November 2017 is 0.6351p per unit for distribution units and 1.5715p per unit for accumulation units. F-Class The distribution payable on 5 November 2017 is 0.7051p per unit for distribution units and 1.7831p per unit for accumulation units. I-Class The distribution payable on 5 November 2017 is 0.7299p per unit for distribution units and 1.9290p per unit for accumulation units. G-Class G-Class units ceased to exist on 22 August 2017. As such, there are no distributions payable on 5 November 2017. X-Class The distribution payable on 5 November 2017 is 0.7328p per unit for distribution units and 2.1955p per unit for accumulation units. 2
Portfolio Information The top 10 holdings and their associated weighting at the current and preceding year ends were: Top 10 Holdings at Top 10 Holdings at 5 September 2017 5 September 2016 Percentage of Percentage of Holding Net Asset Value Holding Net Asset Value Nyrstar Netherlands 6.875% 15/03/2024 1.50% Corral Petroleum 11.75% 15/05/2021 1.35% Adient Global 3.5% 15/08/2024 1.35% Valeant Pharmaceuticals International 4.5% 15/05/2023 1.34% Schumann 7% 31/07/2023 1.24% CMF 9% 15/06/2022 1.18% Aldesa Financial Services 7.25% 01/04/2021 1.09% Ausdrill Finance 6.875% 01/11/2019 1.05% DEA Finance 7.5% 15/10/2022 1.01% Navios Maritime Acquisition 8.125% 15/11/2021 0.99% ArcelorMittal 6.75% 01/03/2041 1.47% Keystone Finance 9.5% 15/10/2019 1.33% Australia Finance 6.875% 01/11/2019 1.31% Nyrstar Netherlands 8.5% 15/09/2019 1.27% MHGE Parent 8.5% 01/08/2019 1.25% Infinis 7% 15/02/2019 1.16% ArcelorMittal 7.5% 15/10/2039 1.10% Manutencoop Facility Management 8.5% 01/08/2020 1.02% Jaguar Land Rover 3.875% 01/03/2023 1.00% Hot Topic 9.25% 15/06/2021 1.00% 3
Trust Holdings as at 5 September 2017 60% 57% 50% 40% 30% 26% 20% 10% 0% 5% 3% 3% 2% 2% 1% 1% Trust Holdings as at 5 September 2016 60% 54% 50% 40% 30% 24% 20% 10% 0% 8% 3% 2% 2% 2% 2% 1% 1% 1% 4
Comparative Tables R-Class Distribution Units Change in Net Asset Value per Unit Accounting year ending 05/09/17 05/09/16 05/09/15 (pence (pence (pence per unit) per unit) per unit) Opening net asset value per unit 48.92 47.88 52.09 Return before operating charges* 4.62 4.66 (0.72) Operating charges (calculated on average price) (0.57) (0.54) (0.58) Return after operating charges* 4.05 4.12 (1.30) Distributions on income units^ (2.74) (3.08) (2.91) Closing net asset value per unit 50.23 48.92 47.88 * after direct transaction costs of: Performance Return after charges 8.28% 8.60% (2.50)% Other Information Closing net asset value ( ) 897,041,792 938,167,785 970,309,799 Closing number of units 1,785,703,022 1,917,763,731 2,026,657,680 Operating charges 1.15% 1.15% 1.15% Direct transaction costs 0.00% 0.00% 0.00% Prices Highest unit price 51.31p 50.08p 52.47p Lowest unit price 48.20p 43.06p 47.88p ^ Distributions on income units are shown gross of taxation. Operating charges, otherwise known as the OCF is the ratio of the Trust s total disclosable costs (excluding overdraft interest) to the average net assets of the Trust. Past performance is not a guide to future performance. The price of units and any income from them may go down as well as up. Exchange rate changes may cause the value of any overseas investments to rise or fall. 5
Comparative Tables continued R-Class Accumulation Units Change in Net Asset Value per Unit Accounting year ending 05/09/17 05/09/16 05/09/15 (pence (pence (pence per unit) per unit) per unit) Opening net asset value per unit 116.37 108.02 112.13 Return before operating charges* 11.25 11.01 (1.58) Operating charges (calculated on average price) (1.39) (1.24) (1.25) Return after operating charges* 9.86 9.77 (2.83) Distributions^ (6.64) (7.10) (6.39) Retained distributions on accumulation units^ 6.28 5.68 5.11 Closing net asset value per unit 125.87 116.37 108.02 * after direct transaction costs of: Performance Return after charges 8.47% 9.04% (2.52)% Other Information Closing net asset value ( ) 106,841,191 102,942,338 105,575,664 Closing number of units 84,884,145 88,464,835 97,739,588 Operating charges 1.15% 1.15% 1.15% Direct transaction costs 0.00% 0.00% 0.00% Prices Highest unit price 126.80p 117.80p 113.90p Lowest unit price 114.70p 98.36p 104.40p ^ Distributions are shown gross of taxation. The amounts shown for 'Retained distributions on accumulation units' are net of 20% income tax, except for distributions made from April 2017 onwards, which will be paid on a gross basis See Significant Changes on page 21. Operating charges, otherwise known as the OCF is the ratio of the Trust s total disclosable costs (excluding overdraft interest) to the average net assets of the Trust. Past performance is not a guide to future performance. The price of units and any income from them may go down as well as up. Exchange rate changes may cause the value of any overseas investments to rise or fall. 6
Comparative Tables continued A-Class Distribution Units Change in Net Asset Value per Unit Accounting year ending 05/09/17 05/09/16 05/09/15 (pence (pence (pence per unit) per unit) per unit) Opening net asset value per unit 48.92 47.88 52.09 Return before operating charges* 4.62 4.66 (0.72) Operating charges (calculated on average price) (0.57) (0.54) (0.58) Return after operating charges* 4.05 4.12 (1.30) Distributions on income units^ (2.74) (3.08) (2.91) Closing net asset value per unit 50.23 48.92 47.88 * after direct transaction costs of: Performance Return after charges 8.28% 8.60% (2.50)% Other Information Closing net asset value ( ) 407,673 451,208 3,743,484 Closing number of units 811,537 922,345 7,818,917 Operating charges 1.15% 1.15% 1.15% Direct transaction costs 0.00% 0.00% 0.00% Prices Highest unit price 52.85p 51.58p 54.05p Lowest unit price 48.20p 43.06p 47.88p ^ Distributions on income units are shown gross of taxation. Operating charges, otherwise known as the OCF is the ratio of the Trust s total disclosable costs (excluding overdraft interest) to the average net assets of the Trust. Past performance is not a guide to future performance. The price of units and any income from them may go down as well as up. Exchange rate changes may cause the value of any overseas investments to rise or fall. 7
Comparative Tables continued A-Class Accumulation Units Change in Net Asset Value per Unit Accounting year ending 05/09/17 05/09/16 05/09/15 (pence (pence (pence per unit) per unit) per unit) Opening net asset value per unit 116.37 108.02 112.13 Return before operating charges* 11.25 11.01 (1.58) Operating charges (calculated on average price) (1.39) (1.24) (1.25) Return after operating charges* 9.86 9.77 (2.83) Distributions^ (6.64) (7.10) (6.39) Retained distributions on accumulation units^ 6.28 5.68 5.11 Closing net asset value per unit 125.87 116.37 108.02 * after direct transaction costs of: Performance Return after charges 8.47% 9.04% (2.52)% Other Information Closing net asset value ( ) 296,631 264,980 2,450,728 Closing number of units 235,671 227,713 2,268,841 Operating charges 1.15% 1.15% 1.15% Direct transaction costs 0.00% 0.00% 0.00% Prices Highest unit price 129.10p 121.30p 117.40p Lowest unit price 114.70p 98.36p 104.40p ^ Distributions are shown gross of taxation. The amounts shown for 'Retained distributions on accumulation units' are net of 20% income tax, except for distributions made from April 2017 onwards, which will be paid on a gross basis See Significant Changes on page 21. Operating charges, otherwise known as the OCF is the ratio of the Trust s total disclosable costs (excluding overdraft interest) to the average net assets of the Trust. Past performance is not a guide to future performance. The price of units and any income from them may go down as well as up. Exchange rate changes may cause the value of any overseas investments to rise or fall. 8
Comparative Tables continued F-Class Distribution Units Change in Net Asset Value per Unit Accounting year ending 05/09/17 05/09/16 05/09/15 (pence (pence (pence per unit) per unit) per unit) Opening net asset value per unit 49.34 48.29 52.54 Return before operating charges* 4.68 4.70 (0.72) Operating charges (calculated on average price) (0.33) (0.31) (0.33) Return after operating charges* 4.35 4.39 (1.05) Distributions on income units^ (3.02) (3.34) (3.20) Closing net asset value per unit 50.67 49.34 48.29 * after direct transaction costs of: Performance Return after charges 8.82% 9.09% (2.00)% Other Information Closing net asset value ( ) 341,800 329,922 619,448 Closing number of units 674,603 668,678 1,282,863 Operating charges 0.65% 0.65% 0.65% Direct transaction costs 0.00% 0.00% 0.00% Prices Highest unit price 51.81p 50.56p 52.92p Lowest unit price 48.66p 43.46p 48.34p ^ Distributions on income units are shown gross of taxation. Operating charges, otherwise known as the OCF is the ratio of the Trust s total disclosable costs (excluding overdraft interest) to the average net assets of the Trust. Past performance is not a guide to future performance. The price of units and any income from them may go down as well as up. Exchange rate changes may cause the value of any overseas investments to rise or fall. 9
Comparative Tables continued F-Class Accumulation Units Change in Net Asset Value per Unit Accounting year ending 05/09/17 05/09/16 05/09/15 (pence (pence (pence per unit) per unit) per unit) Opening net asset value per unit 119.53 110.51 114.25 Return before operating charges* 11.59 11.29 (1.60) Operating charges (calculated on average price) (0.81) (0.71) (0.72) Return after operating charges* 10.78 10.58 (2.32) Distributions^ (7.46) (7.81) (7.09) Retained distributions on accumulation units^ 7.06 6.25 5.67 Closing net asset value per unit 129.91 119.53 110.51 * after direct transaction costs of: Performance Return after charges 9.02% 9.57% (2.03)% Other Information Closing net asset value ( ) 320,263 237,028 246,914 Closing number of units 246,529 198,302 223,438 Operating charges 0.65% 0.65% 0.65% Direct transaction costs 0.00% 0.00% 0.00% Prices Highest unit price 130.90p 121.00p 116.40p Lowest unit price 117.90p 100.90p 106.50p ^ Distributions are shown gross of taxation. The amounts shown for 'Retained distributions on accumulation units' are net of 20% income tax, except for distributions made from April 2017 onwards, which will be paid on a gross basis See Significant Changes on page 21. Operating charges, otherwise known as the OCF is the ratio of the Trust s total disclosable costs (excluding overdraft interest) to the average net assets of the Trust. Past performance is not a guide to future performance. The price of units and any income from them may go down as well as up. Exchange rate changes may cause the value of any overseas investments to rise or fall. 10
Comparative Tables continued I-Class Distribution Units Change in Net Asset Value per Unit Accounting year ending 05/09/17 05/09/16 05/09/15 (pence (pence (pence per unit) per unit) per unit) Opening net asset value per unit 48.92 47.87 52.08 Return before operating charges* 4.62 4.67 (0.71) Operating charges (calculated on average price) (0.20) (0.19) (0.21) Return after operating charges* 4.42 4.48 (0.92) Distributions on income units^ (3.11) (3.43) (3.29) Closing net asset value per unit 50.23 48.92 47.87 * after direct transaction costs of: Performance Return after charges 9.04% 9.36% (1.77)% Other Information Closing net asset value ( ) 269,271,211 221,342,668 161,125,095 Closing number of units 536,070,420 452,502,593 336,603,696 Operating charges 0.41% 0.41% 0.41% Direct transaction costs 0.00% 0.00% 0.00% Prices Highest unit price 51.40p 50.14p 52.47p Lowest unit price 48.25p 43.09p 47.92p ^ Distributions on income units are shown gross of taxation. Operating charges, otherwise known as the OCF is the ratio of the Trust s total disclosable costs (excluding overdraft interest) to the average net assets of the Trust. Past performance is not a guide to future performance. The price of units and any income from them may go down as well as up. Exchange rate changes may cause the value of any overseas investments to rise or fall. 11
Comparative Tables continued I-Class Accumulation Units Change in Net Asset Value per Unit Accounting year ending 05/09/17 05/09/16 05/09/15 (pence (pence (pence per unit) per unit) per unit) Opening net asset value per unit 123.62 114.07 117.71 Return before operating charges* 12.00 11.69 (1.65) Operating charges (calculated on average price) (0.53) (0.47) (0.47) Return after operating charges* 11.47 11.22 (2.12) Distributions^ (8.03) (8.36) (7.59) Retained distributions on accumulation units^ 7.61 6.69 6.07 Closing net asset value per unit 134.67 123.62 114.07 * after direct transaction costs of: Performance Return after charges 9.28% 9.84% (1.80)% Other Information Closing net asset value ( ) 91,195,394 87,069,173 98,208,037 Closing number of units 67,718,483 70,430,565 86,093,496 Operating charges 0.41% 0.41% 0.41% Direct transaction costs 0.00% 0.00% 0.00% Prices Highest unit price 135.70p 125.10p 120.10p Lowest unit price 122.00p 104.20p 109.80p ^ Distributions are shown gross of taxation. The amounts shown for 'Retained distributions on accumulation units' are net of 20% income tax, except for distributions made from April 2017 onwards, which will be paid on a gross basis See Significant Changes on page 21. Operating charges, otherwise known as the OCF is the ratio of the Trust s total disclosable costs (excluding overdraft interest) to the average net assets of the Trust. Past performance is not a guide to future performance. The price of units and any income from them may go down as well as up. Exchange rate changes may cause the value of any overseas investments to rise or fall. 12
Comparative Tables continued G-Class Distribution Units Change in Net Asset Value per Unit Accounting year ending 05/09/17 1 05/09/16 05/09/15 (pence (pence (pence per unit) per unit) per unit) Opening net asset value per unit 49.25 48.24 52.52 Return before operating charges* 4.25 4.67 (0.73) Operating charges (calculated on average price) 0.00 0.00 (0.01) Return after operating charges* 4.25 4.67 (0.74) Distributions on income units^ (2.56) (3.66) (3.54) Closing net asset value per unit 1 50.94 49.25 48.24 * after direct transaction costs of: Performance Return after charges 8.63% 9.68% (1.41)% Other Information Closing net asset value ( ) 523 507 Closing number of units 1,062 1,051 Operating charges 0.01% 0.01% 0.01% Direct transaction costs 0.00% 0.00% 0.00% Prices Highest unit price 51.85p 50.74p 52.88p Lowest unit price 48.72p 43.59p 48.32p 1 G-class units ceased to exist on 22 August 2017. Value shown is the closing net asset value at this date. ^ Distributions on income units are shown gross of taxation. Operating charges, otherwise known as the OCF is the ratio of the Trust s total disclosable costs (excluding overdraft interest) to the average net assets of the Trust. Past performance is not a guide to future performance. The price of units and any income from them may go down as well as up. Exchange rate changes may cause the value of any overseas investments to rise or fall. 13
Comparative Tables continued G-Class Accumulation Units Change in Net Asset Value per Unit Accounting year ending 05/09/17 1 05/09/16 05/09/15 (pence (pence (pence per unit) per unit) per unit) Opening net asset value per unit 107.29 97.13 98.52 Return before operating charges* 9.38 10.17 (1.38) Operating charges (calculated on average price) (0.01) (0.01) (0.01) Return after operating charges* 9.37 10.16 (1.39) Distributions^ (5.66) (7.57) (6.79) Retained distributions on accumulation units^ 5.66 7.57 6.79 Closing net asset value per unit 1 116.66 107.29 97.13 * after direct transaction costs of: Performance Return after charges 8.73% 10.46% (1.41)% Other Information Closing net asset value ( ) 1,233 1,116 Closing number of units 1,149 1,149 Operating charges 0.01% 0.01% 0.01% Direct transaction costs 0.00% 0.00% 0.00% Prices Highest unit price 118.10p 108.50p 101.80p Lowest unit price 106.20p 89.44p 92.29p 1 G-class units ceased to exist on 22 August 2017. Value shown is the closing net asset value at this date. ^ Distributions and Retained distributions on accumulation units are shown gross of taxation. Operating charges, otherwise known as the OCF is the ratio of the Trust s total disclosable costs (excluding overdraft interest) to the average net assets of the Trust. Past performance is not a guide to future performance. The price of units and any income from them may go down as well as up. Exchange rate changes may cause the value of any overseas investments to rise or fall. 14
Comparative Tables continued X-Class Distribution Units Change in Net Asset Value per Unit Accounting year ending 05/09/17 05/09/16 05/09/15 (pence (pence (pence per unit) per unit) per unit) Opening net asset value per unit 49.13 48.07 52.30 Return before operating charges* 4.64 4.70 (0.71) Operating charges (calculated on average price) (0.21) (0.19) (0.21) Return after operating charges* 4.43 4.51 (0.92) Distributions on income units^ (3.12) (3.45) (3.31) Closing net asset value per unit 50.44 49.13 48.07 * after direct transaction costs of: Performance Return after charges 9.02% 9.38% (1.76)% Other Information Closing net asset value ( ) 7,782,882 4,073,616 3,301,181 Closing number of units 15,430,828 8,292,261 6,867,341 Operating charges 0.41% 0.41% 0.41% Direct transaction costs 0.00% 0.00% 0.00% Prices Highest unit price 51.61p 50.52p 52.69p Lowest unit price 48.55p 43.42p 48.14p ^ Distributions on income units are shown gross of taxation. Operating charges, otherwise known as the OCF is the ratio of the Trust s total disclosable costs (excluding overdraft interest) to the average net assets of the Trust. Past performance is not a guide to future performance. The price of units and any income from them may go down as well as up. Exchange rate changes may cause the value of any overseas investments to rise or fall. 15
Comparative Tables continued X-Class Accumulation Units Change in Net Asset Value per Unit Accounting year ending 05/09/17 05/09/16 05/09/15 (pence (pence (pence per unit) per unit) per unit) Opening net asset value per unit 140.30 127.54 129.90 Return before operating charges* 13.64 13.29 (1.84) Operating charges (calculated on average price) (0.61) (0.53) (0.52) Return after operating charges* 13.03 12.76 (2.36) Distributions^ (9.12) (9.41) (8.42) Retained distributions on accumulation units^ 9.12 9.41 8.42 Closing net asset value per unit 153.33 140.30 127.54 * after direct transaction costs of: Performance Return after charges 9.29% 10.00% (1.82)% Other Information Closing net asset value ( ) 705,374 150,585 141,701 Closing number of units 460,025 107,330 111,102 Operating charges 0.41% 0.41% 0.41% Direct transaction costs 0.00% 0.00% 0.00% Prices Highest unit price 154.50p 142.00p 133.90p Lowest unit price 138.80p 117.30p 121.60p ^ Distributions and Retained distributions on accumulation units are shown gross of taxation. Operating charges, otherwise known as the OCF is the ratio of the Trust s total disclosable costs (excluding overdraft interest) to the average net assets of the Trust. Past performance is not a guide to future performance. The price of units and any income from them may go down as well as up. Exchange rate changes may cause the value of any overseas investments to rise or fall. 16
Manager s Investment Report During the year under review, the bid price of the Trust s R-Class accumulation units rose by 8.16%. Past performance is not a guide to future performance. The value of investments and any income from them may go down as well as up. Exchange rate changes may cause the value of any overseas investments to rise or fall. Market/Economic Review Global economic activity has improved markedly over the past twelve months. The recovery has been particularly strong in the manufacturing sector, accompanied by an upturn in global trade volumes, although recent data suggests this has now peaked with inventories starting to rise from a low level. Higher commodity prices over the second half of 2016 have been reflected in rising consumer price inflation in the major developed economies. As President Trump s victory in the November presidential election focused investors on the prospect of increased infrastructure spending and tax cuts, the Federal Reserve (Fed) signalled a gradual tightening of monetary policy, raising interest rates three times over the last twelve months. The Fed also signalled it would begin unwinding its asset purchase programme, known as quantitative easing (QE), in the autumn. Global high yield markets rose strongly over the year under review, led by emerging markets. Emerging bond markets attracted substantial inflows from international investors looking for higher levels of income, and outperformed other fixed income markets. Trust Review The Trust delivered strong returns and outperformed both the benchmark and the sector over the year under review, with the portfolio proving to be well-positioned at a macro level, especially the overweight stance in emerging markets. From a regional perspective we continue to run a higher yield than the benchmark, with an overweight in single B rated bonds to take advantage of what we believe to be positive macroeconomic conditions. We see the best opportunities in emerging markets and Europe, and therefore maintain our underweight to North American high yield bonds. In terms of activity, we took advantage of new issues during the final quarter of 2016, which offered a larger premium than they had previously due to concerns over the potential for interest rate rises, as well as political concerns in advance of the US election. In 2017 our attention was mainly on the secondary market where we looked for opportunities to rotate active positions where we deemed this beneficial. 17
Manager s Investment Report continued Outlook Looking ahead, if we continue to see reasonable economic growth with moderate volatility, defaults may have peaked already, we could be back to low single-digit default levels. If that environment persists, the grab for yield is likely to accelerate and income-seeking investors could seek to buy high yield. If the US Federal Reserve raises rates too early and too quickly, or if China slows beyond expectations, then problems could arise. However, in a tougher environment, we believe that high yield could outperform riskier assets such as equities. In addition, high yield could be protected to some extent from the effect of rate rises due to the shorter duration of the asset class (4 years). There are concerns, even in a benign environment, that the threats of mismanagement, and regulatory and technological change will affect sectors such as healthcare, telecommunications and cable. Being global, we aim to capture the best opportunities we can find and to take advantage of complacency and exaggerated fears in the market. Legal & General Investment Management Limited (Investment Adviser) 26 September 2017 18
Manager s Report and Accounts Copies of the most recent Interim and Annual Long Form Manager s Reports are available free of charge by telephoning 0370 050 0955, by writing to the Manager or are available on the internet at www.legalandgeneral.com/investments/fundinformation/managers-reports. Call charges will vary. We may record and monitor calls. EU Savings Directive The Trust has been reviewed against the requirements of the Directive 2003/48/EC on Taxation of savings in the form of interest payments (ESD), following the HM Revenue & Customs debt investment reporting guidance notes. Under the Directive, information is collected about the payment of distributions to residents in certain other countries and is reported to HM Revenue & Customs to be exchanged with Tax authorities in those countries. The Trust falls within the 25% debt investment reporting threshold. This means that details of all distributions and redemption proceeds paid to non UK investors will be reported by Legal & General (Unit Trust Managers) Limited to HM Revenue & Customs to be exchanged with the relevant Tax authorities. Dual Pricing Arrangement The Manager s fixed dual pricing arrangement has a set spread to account for the costs of transacting in a particular Trust. Where the Manager operates a box through which unit subscriptions and unit redemptions are netted into a single trade instruction to the Trustee, the netting reduces the actual transaction costs and this generates a revenue to the Manager. The revenue generated from this activity is calculated on a monthly basis and returned to the Trust in the form of a payment from the Manager. This provides an enhanced return to the Trust, though the size of any return will be dependent on the size of subscriptions and redemptions. 19
Minimum Investment Amounts The minimum initial lump sum investment amounts for each class are as follows: R-Class 500 A-Class 500 F-Class 500 I-Class 1,000,000 G-Class 1,000,000 X-Class 1,000,000 In addition, monthly contributions can be made into the R-Class, A Class and F-Class with a minimum amount of 50 per month. F-Class units are only available to: i) investors who have received advice from authorised intermediaries and platforms in relation to their investment in units in the Trust and ii) authorised intermediaries or distributers who the Manager reasonably considers will adequately bear the costs of marketing to and acquiring investors at no or limited cost to the Manager, and to whom the Manager has confirmed that such distributer or investor meets the criteria for investment in such units. Other Information The information in this report is designed to enable unitholders to understand how the Trust has performed during the year under review and how it is invested at the year end. Further information on the activities and performance of the Trust can be obtained by telephoning 0370 050 0955 or by writing to the Manager. Call charges will vary. We may record and monitor calls. 20
Significant Changes Gross Distribution Payments We d like to make you aware of an HM Revenue & Customs ruling which became effective from 6 April 2017. Where interest distributions were previously paid net, we are required to start paying all interest distributions on a gross basis, starting with the May 2017 distribution payment. Prior to 6 April 2017, interest distributions were paid to clients after the deduction of 20% income tax, unless the client has completed a gross declaration form. From 6 April 2017, we will not deduct tax on any interest distributions and all payments will be made gross. It will become your responsibility to make any declarations to HM Revenue & Customs. If you are in any doubt as to your taxation position, please consult a professional adviser. Removal of the Initial Charge for A-Class With effect from 6 June 2017, the initial charge for A-Class units has been removed. Prior to this change the initial charge was 3%. The removal of the initial charge will provide better value for investors, as there is no longer a cost of setting up the investment. Removal of Initial Commission With effect from 6 June 2017, initial commission will no longer be paid on the Trust. The initial commission was intended to reflect the costs incurred by the product provider and the intermediary for setting up and selling the business, however, Legal & General no longer consider it appropriate to continue to pay commission on such transactions G-Class Closure With effect from 22 August 2017, the G-Class has been closed. 21
Authorised Fund Manager Legal & General (Unit Trust Managers) Limited Registered in England and Wales No. 01009418 Registered office: One Coleman Street, London EC2R 5AA Telephone: 0370 050 3350 Authorised and regulated by the Financial Conduct Authority Call charges will vary. We may record and monitor calls. Trustee Northern Trust Global Services Limited 50 Bank Street, Canary Wharf, London E14 5NT Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority Independent Auditors PricewaterhouseCoopers LLP 7 More London Riverside London SE1 2RT 22
Authorised and regulated by the Financial Conduct Authority Legal & General (Unit Trust Managers) Limited Registered in England and Wales No. 01009418 Registered office: One Coleman Street, London EC2R 5AA www.legalandgeneral.com HIT1117